I'm generally a 'risk tolerant' investor, so have our SMSF money invested in the Vanguard 'High Growth' diversified Index fund, and have some margin loans (funded with a home equity loan) that are invested in ETF funds and some CFS geared equity funds (so, using home equity to fund a margin loan to fund a geared share fund is what would sometimes be termed 'triple geared' !).
Anyhow, an opinion piece in today's SMH about the immediate impact of the nCoV outbreak on China's industry (basically it's shut down until 14 Feb) and longer term outlook (the WHO daily SITREPs on nCoV cases doesn't show any major reduction in the rate of reported spread, and there may be under-reporting issues in Indonesia, and in the Chinese figures themselves) for a prolonged impact on Chinese GDP and therefore global trade and GDP, highlighted to me that aside from being a major health concern, the nCoV pandemic exposes the Chinese and global economies to increased risk. Far from Chinese industry getting 'back to normal' after 14 Feb, the continued increase in nCoV cases suggests that either a) the 'shut down' will be extended, having a major impact on economic expectations and hence share markets, or b) factories re-open as planned, but the spread of nCoV will therefore be harder to control and may have a significant long-term impact on Chinese economic performance and hence the equity markets.
Overall, there seems to be considerable down-side risk and no up-side potential (aside from health stocks such as CSL). Therefore I decided to 'rebalance' my portfolio by reallocating our SMSF from the High Growth option to a mix of Conservative (70%) and Bond (30%) options, and by selling off my geared share fund investments (and use the proceeds to pay off my margin loans and reduce my home equity loan balance). I monitor how things go over the next 3-12 months to decide when to increase my equity weighting again.
Although this will result in some capital gains tax liability, I've learned from the GFC that when its time to reduce investment risk, taxation issues should not be the tail that wags the dog.
Time will tell if this was a prudent investment decision, or an overreaction.
Being invested in 'cash' might also provide an opportunity to make some undeducted contributions into my superannuation, before my total super balance hit the 'cap'.
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